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700 or 2% of US car dealers may close- but could there still be light for US Auto?

With all the turmoil in financial markets the troubled US auto industry seems to be on the verge of total collapse.  700 dealers might close because customers can't get finance as Ford and GM stock touched a57 year low.

All may not be lost for US auto as the GM-Chrysler deal might promote receiving some federal funding to re-tool. On the distribution side with the closing distributorships I was cheered to read some comments here . According to these comments most if not all these 700 dealers will be US Auto dealers and not import dealers. These auto dealers are ones with large product lines,little differentiation among offerings and too much territory squeeze much like McDonald franchises who might wake up to find another McDonald just across the road and much more competition.

If this is indeed true for US auto distributors then there might be streamlining of the distribution channels and remaining dealers might become more healthy when the credit situation improves.

I tried comparing the "locate" the dealer feature for "Chevy" on the GM website and the locate a dealer for Toyota.Toyota offers one dealer when you search by ZIP code after which you have to dig deeper for more dealers.On the other hand, GM starts with 3 dealers on the first page and offers 3-4 pages of dealers. Too much choice for lesser numbers of cars sold and probably too many dealers.

Seems similar to the US auto upstream supplier policy of having many component suppliers who have a hard time turning a decent profit. Here downstream distributors seem to also have too much "internal" competition to turn in good profits. The situation is off course much more difficult in tough economic times.

Will Budweiser change?

The news that InBev has taken over Anheuser-Busch for $52 billion is a major event for both marketing and the supply chain.Although,initial reports suggest that the big benefit of the merger is the enormous brand power and marketing muscle  of "Bud" in the US market,it seems likely that the new management will review  some of the traditional advertising  that Budweiser has been known for.Also,a focus of the American entity will be to cut supply chain costs by $1.6 Billion.

College classrooms will suddenly find the enormous marketing teaching material developed around the "Budweiser" brand outdated. Marketing clubs routinely discuss the Superbowl ads, dominated by "Bud" and things may change there as well.Similarly the famous supply chain beer game will probably need some reworking.

In fact, the merger will throw up enormous opportunity and challenges,not only for the merged entity but entire armies of consultants,speakers,professors and students will suddenly have to take a fresh look at global alliances, in this case a merger, and it's impact on something we assumed would never change viz. Budweiser and it's larger than life dominance in the American psyche.

For starters, consider the InBev website's brand section that asks you your country of residence and date of birth while the Anheuser-Busch website asks you if you are over 21 and simply assumes US residence. All this will start changing as "Bud" becomes truly global.Similarly, before making any marketing changes in a great marketing formula, the new A-B-InBev organization should sure tread carefully lest we have one more "New Coke."

Alliances,mergers and supply chains

2007 has got off to a great start - the weather in the North East US is unseasonably warm and people are not complaining although there is underlying concern about "global" warming. It's interesting that we have started looking at weather with a "global" perspective. Switching gears, I just finished a research paper on global alliances and innovation in high tech -high change sectors. High tech sectors like biotech,pharma,certain types of engineering involve lots of trials and rapid change. Global alliances have become a particularly useful and flexible organizational option to deal with expert knowledge domains on a "short term" basis. Joint Ventures (JV's)have become less favored organizational forms because of rigidity ,high failure rates and the need of partners to fight over "control". Thus 90's have seen a decline of JV's and a rise in alliances. With the growth in Internet and web based "visible" global supply chains the demand for supply chain visibility can now be met.

Mergers and acquisitions on the other hand are driven by all kinds of reasons that look financially good (say one partner has valuable real estate,great scientists, a great new product pipeline) with one big downside. Merged organizations have huge management problems including managing combined  personnel and supply chains. M&A's are therefore the opposite end of a working alliance in terms of being able to make the supply chain work in a non-duplicated and integrated fashion. Things become more challenging when prior due diligence does not have Supply Chain integration as a top priority as this report by Robert Malone suggests. I tend to agree with Jay Welsh of Accenture when he says that Supply Chain executives get involved after the merger deal is done. It'll be nice to know how many acquiring companies really provide for adequate money and time that is required to integrate global supply chains particularly with multiple locations in multiple countries.